Page | ||||
PART I. FINANCIAL INFORMATION | ||||
Item 1. | Financial Statements (Unaudited) | |||
Consolidated Balance Sheets | ||||
Consolidated Statements of Operations | ||||
Consolidated Statements of Comprehensive Income | ||||
Consolidated Statements of Shareholders' Equity | ||||
Consolidated Statements of Cash Flows | ||||
Notes to Consolidated Financial Statements | ||||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | |||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | |||
Item 4. | Controls and Procedures | |||
Part II. OTHER INFORMATION | ||||
Item 1. | Legal Proceedings | |||
Item 1A. | Risk Factors | |||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |||
Item 3. | Defaults Upon Senior Securities | |||
Item 4. | Mine Safety Disclosure | |||
Item 5. | Other Information | |||
Item 6. | Exhibits | |||
Signatures | ||||
ITEM 1. | FINANCIAL STATEMENTS |
June 30, 2015 | December 31, 2014 | ||||||
Assets | |||||||
Unrestricted cash and cash equivalents | $ | 46,328 | $ | 39,925 | |||
Restricted cash and cash equivalents | 16,859 | 22,741 | |||||
Loans and fees receivable: | |||||||
Loans and fees receivable, net (of $18,198 and $15,730 in deferred revenue and $16,295 and $19,957 in allowances for uncollectible loans and fees receivable at June 30, 2015 and December 31, 2014, respectively) | 120,085 | 105,897 | |||||
Loans and fees receivable, at fair value | 11,512 | 18,255 | |||||
Loans and fees receivable pledged as collateral under structured financings, at fair value | 27,464 | 34,905 | |||||
Rental merchandise, net of depreciation | 12,006 | 14,177 | |||||
Property at cost, net of depreciation | 6,472 | 7,036 | |||||
Investments in equity-method investees | 12,901 | 15,833 | |||||
Deposits | 981 | 1,589 | |||||
Prepaid expenses and other assets | 17,324 | 7,997 | |||||
Total assets | $ | 271,932 | $ | 268,355 | |||
Liabilities | |||||||
Accounts payable and accrued expenses | $ | 40,401 | $ | 39,968 | |||
Notes payable, at face value | 84,514 | 78,749 | |||||
Notes payable to related parties | 20,000 | 20,000 | |||||
Notes payable associated with structured financings, at fair value | 28,685 | 36,511 | |||||
Convertible senior notes | 64,537 | 64,752 | |||||
Income tax liability | 21,594 | 20,933 | |||||
Total liabilities | 259,731 | 260,913 | |||||
Commitments and contingencies (Note 9) | |||||||
Equity | |||||||
Common stock, no par value, 150,000,000 shares authorized: 15,370,667 shares issued and outstanding (including 1,459,233 loaned shares to be returned) at June 30, 2015; and 15,308,971 shares issued and outstanding (including 1,459,233 loaned shares to be returned) at December 31, 2014 | — | — | |||||
Additional paid-in capital | 210,762 | 210,519 | |||||
Accumulated other comprehensive loss | (685 | ) | (1,841 | ) | |||
Retained deficit | (197,873 | ) | (201,237 | ) | |||
Total shareholders’ equity | 12,204 | 7,441 | |||||
Noncontrolling interests | (3 | ) | 1 | ||||
Total equity | 12,201 | 7,442 | |||||
Total liabilities and equity | $ | 271,932 | $ | 268,355 |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Interest income: | |||||||||||||||
Consumer loans, including past due fees | $ | 16,869 | $ | 17,387 | $ | 34,312 | $ | 37,344 | |||||||
Other | 10 | 37 | 42 | 274 | |||||||||||
Total interest income | 16,879 | 17,424 | 34,354 | 37,618 | |||||||||||
Interest expense | (4,529 | ) | (6,158 | ) | (9,086 | ) | (12,345 | ) | |||||||
Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable | 12,350 | 11,266 | 25,268 | 25,273 | |||||||||||
Fees and related income on earning assets | 12,751 | 22,196 | 25,970 | 55,081 | |||||||||||
Net recovery of (losses upon) charge off of loans and fees receivable recorded at fair value, net of recoveries | 9,991 | 50 | 20,363 | (1,835 | ) | ||||||||||
Provision for losses on loans and fees receivable recorded at net realizable value | (5,961 | ) | (6,731 | ) | (9,129 | ) | (14,606 | ) | |||||||
Net interest income, fees and related income on earning assets | 29,131 | 26,781 | 62,472 | 63,913 | |||||||||||
Other operating income: | |||||||||||||||
Servicing income | 1,390 | 1,234 | 2,950 | 2,474 | |||||||||||
Other income | 92 | 254 | 359 | 1,321 | |||||||||||
Equity in income of equity-method investees | 707 | 841 | 1,782 | 3,247 | |||||||||||
Total other operating income | 2,189 | 2,329 | 5,091 | 7,042 | |||||||||||
Other operating expense: | |||||||||||||||
Salaries and benefits | 4,322 | 4,664 | 8,442 | 9,762 | |||||||||||
Card and loan servicing | 9,608 | 12,956 | 19,879 | 26,734 | |||||||||||
Marketing and solicitation | 332 | 631 | 818 | 1,393 | |||||||||||
Depreciation, primarily related to rental merchandise | 9,961 | 16,573 | 22,807 | 42,281 | |||||||||||
Other | 4,261 | 4,791 | 11,433 | 10,331 | |||||||||||
Total other operating expense | 28,484 | 39,615 | 63,379 | 90,501 | |||||||||||
Income (loss) before income taxes | 2,836 | (10,505 | ) | 4,184 | (19,546 | ) | |||||||||
Income tax expense | (1,440 | ) | (673 | ) | (822 | ) | (2,655 | ) | |||||||
Net income (loss) | 1,396 | (11,178 | ) | 3,362 | (22,201 | ) | |||||||||
Net loss (income) attributable to noncontrolling interests | 1 | — | 2 | (151 | ) | ||||||||||
Net income (loss) attributable to controlling interests | $ | 1,397 | $ | (11,178 | ) | $ | 3,364 | $ | (22,352 | ) | |||||
Net income (loss) attributable to controlling interests per common share—basic | $ | 0.10 | $ | (0.80 | ) | $ | 0.24 | $ | (1.59 | ) | |||||
Net income (loss) attributable to controlling interests per common share—diluted | $ | 0.10 | $ | (0.80 | ) | $ | 0.24 | $ | (1.59 | ) |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net income (loss) | $ | 1,396 | $ | (11,178 | ) | $ | 3,362 | $ | (22,201 | ) | |||||
Other comprehensive income (loss): | |||||||||||||||
Foreign currency translation adjustment | 583 | 386 | 140 | 447 | |||||||||||
Reclassifications of foreign currency translation adjustment to consolidated statements of operations | — | — | 1,535 | — | |||||||||||
Income tax (expense) benefit related to other comprehensive income (loss) | (200 | ) | (11 | ) | (519 | ) | 23 | ||||||||
Comprehensive income (loss) | 1,779 | (10,803 | ) | 4,518 | (21,731 | ) | |||||||||
Comprehensive loss (income) attributable to noncontrolling interests | 1 | — | 2 | (151 | ) | ||||||||||
Comprehensive income (loss) attributable to controlling interests | $ | 1,780 | $ | (10,803 | ) | $ | 4,520 | $ | (21,882 | ) |
Common Stock | ||||||||||||||||||||||||||
Shares Issued | Amount | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Retained Deficit | Noncontrolling Interests | Total Equity | ||||||||||||||||||||
Balance at December 31, 2014 | 15,308,971 | $ | — | $ | 210,519 | $ | (1,841 | ) | $ | (201,237 | ) | $ | 1 | $ | 7,442 | |||||||||||
Stock options exercises and proceeds related thereto | 1,667 | — | 4 | — | — | — | 4 | |||||||||||||||||||
Compensatory stock issuances, net of forfeitures | 106,334 | — | — | — | — | — | — | |||||||||||||||||||
Distributions to owners of noncontrolling interests | — | — | — | — | — | (2 | ) | (2 | ) | |||||||||||||||||
Amortization of deferred stock-based compensation costs | — | — | 437 | — | — | — | 437 | |||||||||||||||||||
Redemption and retirement of shares | (46,305 | ) | — | (123 | ) | — | — | — | (123 | ) | ||||||||||||||||
Tax effects of stock-based compensation plans | — | — | (75 | ) | — | — | — | (75 | ) | |||||||||||||||||
Other comprehensive income | — | — | — | 1,156 | 3,364 | (2 | ) | 4,518 | ||||||||||||||||||
Balance at June 30, 2015 | 15,370,667 | $ | — | $ | 210,762 | $ | (685 | ) | $ | (197,873 | ) | $ | (3 | ) | $ | 12,201 |
For the Six Months Ended June 30, | |||||||
2015 | 2014 | ||||||
Operating activities | |||||||
Net income (loss) | $ | 3,362 | $ | (22,201 | ) | ||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | |||||||
Depreciation of rental merchandise | 21,623 | 40,746 | |||||
Depreciation, amortization and accretion, net | 1,056 | 643 | |||||
Losses upon charge off of loans and fees receivable recorded at fair value | 3,050 | 8,719 | |||||
Provision for losses on loans and fees receivable | 9,129 | 14,606 | |||||
Interest expense from accretion of discount on convertible senior notes | 235 | 321 | |||||
Income from accretion of discount associated with receivables purchases | (18,914 | ) | (16,438 | ) | |||
Unrealized gain on loans and fees receivable and underlying notes payable held at fair value | (2,430 | ) | (4,359 | ) | |||
Income from equity-method investments | (1,782 | ) | (3,247 | ) | |||
Changes in assets and liabilities: | |||||||
(Increase) decrease in uncollected fees on earning assets | (394 | ) | 121 | ||||
Increase in income tax liability | 90 | 2,589 | |||||
Decrease (increase) in deposits | 608 | (494 | ) | ||||
Increase (decrease) in accounts payable and accrued expenses | 515 | (11,502 | ) | ||||
Additions to rental merchandise | (19,451 | ) | (22,975 | ) | |||
Other | (6,904 | ) | (1,096 | ) | |||
Net cash used in operating activities | (10,207 | ) | (14,567 | ) | |||
Investing activities | |||||||
Decrease (increase) in restricted cash | 5,889 | (207 | ) | ||||
Proceeds from equity-method investees | 4,714 | 6,332 | |||||
Investments in earning assets | (127,418 | ) | (100,915 | ) | |||
Proceeds from earning assets | 137,397 | 122,617 | |||||
Purchases and development of property, net of disposals | (616 | ) | (3,183 | ) | |||
Net cash provided by investing activities | 19,966 | 24,644 | |||||
Financing activities | |||||||
Noncontrolling interests distributions, net | (2 | ) | (145 | ) | |||
Proceeds from exercise of stock options | 4 | — | |||||
Purchase and retirement of outstanding stock | (123 | ) | (31 | ) | |||
Proceeds from borrowings | 88,802 | 28,322 | |||||
Repayment of borrowings | (91,960 | ) | (56,445 | ) | |||
Net cash used in financing activities | (3,279 | ) | (28,299 | ) | |||
Effect of exchange rate changes on cash | (77 | ) | 270 | ||||
Net decrease (increase) in unrestricted cash | 6,403 | (17,952 | ) | ||||
Unrestricted cash and cash equivalents at beginning of period | 39,925 | 50,873 | |||||
Unrestricted cash and cash equivalents at end of period | $ | 46,328 | $ | 32,921 | |||
Supplemental cash flow information | |||||||
Cash paid for interest | $ | 8,941 | $ | 18,602 | |||
Net cash income tax payments | $ | 737 | $ | 66 | |||
Supplemental non-cash information | |||||||
Issuance of stock options and restricted stock | $ | 281 | $ | 931 | |||
Notes payable associated with capital leases | $ | — | $ | 159 |
1. | Description of Our Business |
2. | Significant Accounting Policies and Consolidated Financial Statement Components |
Balance at December 31, 2014 | Additions | Subtractions | Balance at June 30, 2015 | ||||||||||||
Loans and fees receivable, gross | $ | 141.6 | $ | 159.2 | $ | (146.2 | ) | $ | 154.6 | ||||||
Deferred revenue | (15.7 | ) | (21.4 | ) | 18.9 | (18.2 | ) | ||||||||
Allowance for uncollectible loans and fees receivable | (20.0 | ) | (9.1 | ) | 12.8 | (16.3 | ) | ||||||||
Loans and fees receivable, net | $ | 105.9 | $ | 128.7 | $ | (114.5 | ) | $ | 120.1 |
Balance at December 31, 2013 | Additions | Subtractions | Balance at June 30, 2014 | ||||||||||||
Loans and fees receivable, gross | $ | 134.7 | $ | 134.9 | $ | (140.0 | ) | $ | 129.6 | ||||||
Deferred revenue | (13.3 | ) | (17.0 | ) | 16.5 | (13.8 | ) | ||||||||
Allowance for uncollectible loans and fees receivable | (24.2 | ) | (14.6 | ) | 18.4 | (20.4 | ) | ||||||||
Loans and fees receivable, net | $ | 97.2 | $ | 103.3 | $ | (105.1 | ) | $ | 95.4 |
For the Three Months Ended June 30, 2015 | Credit Cards | Auto Finance | Other Unsecured Lending Products | Total | ||||||||||||
Allowance for uncollectible loans and fees receivable: | ||||||||||||||||
Balance at beginning of period | $ | (1.9 | ) | $ | (1.2 | ) | $ | (12.5 | ) | $ | (15.6 | ) | ||||
Provision for loan losses | (0.4 | ) | (0.4 | ) | (5.2 | ) | (6.0 | ) | ||||||||
Charge offs | 0.9 | 0.4 | 4.4 | 5.7 | ||||||||||||
Recoveries | (0.1 | ) | (0.1 | ) | (0.2 | ) | (0.4 | ) | ||||||||
Balance at end of period | $ | (1.5 | ) | $ | (1.3 | ) | $ | (13.5 | ) | $ | (16.3 | ) | ||||
For the Six Months Ended June 30, 2015 | Credit Cards | Auto Finance | Other Unsecured Lending Products | Total | ||||||||||||
Allowance for uncollectible loans and fees receivable: | ||||||||||||||||
Balance at beginning of period | $ | (2.7 | ) | $ | (1.2 | ) | $ | (16.1 | ) | $ | (20.0 | ) | ||||
Provision for loan losses | (0.9 | ) | (0.6 | ) | (7.6 | ) | (9.1 | ) | ||||||||
Charge offs | 2.3 | 0.9 | 10.9 | 14.1 | ||||||||||||
Recoveries | (0.2 | ) | (0.4 | ) | (0.7 | ) | (1.3 | ) | ||||||||
Balance at end of period | $ | (1.5 | ) | $ | (1.3 | ) | $ | (13.5 | ) | $ | (16.3 | ) |
As of June 30, 2015 | Credit Cards | Auto Finance | Other Unsecured Lending Products | Total | ||||||||||||
Allowance for uncollectible loans and fees receivable: | ||||||||||||||||
Balance at end of period individually evaluated for impairment | $ | — | $ | (0.1 | ) | $ | (1.1 | ) | $ | (1.2 | ) | |||||
Balance at end of period collectively evaluated for impairment | $ | (1.5 | ) | $ | (1.2 | ) | $ | (12.4 | ) | $ | (15.1 | ) | ||||
Loans and fees receivable: | ||||||||||||||||
Loans and fees receivable, gross | $ | 4.1 | $ | 78.3 | $ | 72.2 | $ | 154.6 | ||||||||
Loans and fees receivable individually evaluated for impairment | $ | — | $ | 0.1 | $ | 2.9 | $ | 3.0 | ||||||||
Loans and fees receivable collectively evaluated for impairment | $ | 4.1 | $ | 78.2 | $ | 69.3 | $ | 151.6 |
For the Three Months Ended June 30, 2014 | Credit Cards | Auto Finance | Other Unsecured Lending Products | Total | ||||||||||||
Allowance for uncollectible loans and fees receivable: | ||||||||||||||||
Balance at beginning of period | $ | (10.9 | ) | $ | (1.4 | ) | $ | (10.8 | ) | $ | (23.1 | ) | ||||
Provision for loan losses | (2.8 | ) | (0.1 | ) | (3.8 | ) | (6.7 | ) | ||||||||
Charge offs | 5.3 | 0.4 | 4.2 | 9.9 | ||||||||||||
Recoveries | (0.1 | ) | (0.3 | ) | (0.1 | ) | (0.5 | ) | ||||||||
Balance at end of period | $ | (8.5 | ) | $ | (1.4 | ) | $ | (10.5 | ) | $ | (20.4 | ) | ||||
For the Six Months Ended June 30, 2014 | Credit Cards | Auto Finance | Other Unsecured Lending Products | Total | ||||||||||||
Allowance for uncollectible loans and fees receivable: | ||||||||||||||||
Balance at beginning of period | $ | (11.6 | ) | $ | (1.4 | ) | $ | (11.2 | ) | $ | (24.2 | ) | ||||
Provision for loan losses | (7.0 | ) | 0.1 | (7.7 | ) | (14.6 | ) | |||||||||
Charge offs | 10.3 | 0.5 | 8.7 | 19.5 | ||||||||||||
Recoveries | (0.2 | ) | (0.6 | ) | (0.3 | ) | (1.1 | ) | ||||||||
Balance at end of period | $ | (8.5 | ) | $ | (1.4 | ) | $ | (10.5 | ) | $ | (20.4 | ) |
As of December 31, 2014 | Credit Cards | Auto Finance | Other Unsecured Lending Products | Total | ||||||||||||
Allowance for uncollectible loans and fees receivable: | ||||||||||||||||
Balance at end of period individually evaluated for impairment | $ | — | $ | (0.1 | ) | $ | (3.0 | ) | $ | (3.1 | ) | |||||
Balance at end of period collectively evaluated for impairment | $ | (2.7 | ) | $ | (1.1 | ) | $ | (13.1 | ) | $ | (16.9 | ) | ||||
Loans and fees receivable: | ||||||||||||||||
Loans and fees receivable, gross | $ | 6.7 | $ | 70.7 | $ | 64.2 | $ | 141.6 | ||||||||
Loans and fees receivable individually evaluated for impairment | $ | — | $ | 0.2 | $ | 5.0 | $ | 5.2 | ||||||||
Loans and fees receivable collectively evaluated for impairment | $ | 6.7 | $ | 70.5 | $ | 59.2 | $ | 136.4 |
June 30, 2015 | December 31, 2014 | ||||||
Current loans receivable | $ | 130.0 | $ | 116.1 | |||
Current fees receivable | 3.3 | 3.4 | |||||
Delinquent loans and fees receivable | 21.3 | 22.1 | |||||
Loans and fees receivable, gross | $ | 154.6 | $ | 141.6 |
Balance at June 30, 2015 | Credit Cards | Auto Finance | Other Unsecured Lending Products | Total | ||||||||||||
30-59 days past due | $ | 0.2 | $ | 6.5 | $ | 3.0 | $ | 9.7 | ||||||||
60-89 days past due | 0.2 | 2.2 | 2.3 | 4.7 | ||||||||||||
90 or more days past due | 0.8 | 1.8 | 4.3 | 6.9 | ||||||||||||
Delinquent loans and fees receivable, gross | 1.2 | 10.5 | 9.6 | 21.3 | ||||||||||||
Current loans and fees receivable, gross | 2.9 | 67.8 | 62.6 | 133.3 | ||||||||||||
Total loans and fees receivable, gross | $ | 4.1 | $ | 78.3 | $ | 72.2 | $ | 154.6 | ||||||||
Balance of loans 90 or more days past due and still accruing interest and fees | $ | — | $ | 1.8 | $ | — | $ | 1.8 |
Balance at December 31, 2014 | Credit Cards | Auto Finance | Other Unsecured Lending Products | Total | |||||||||||
30-59 days past due | $ | 0.4 | $ | 6.3 | $ | 2.8 | $ | 9.5 | |||||||
60-89 days past due | 0.4 | 2.1 | 2.2 | 4.7 | |||||||||||
90 or more days past due | 1.6 | 1.7 | 4.6 | 7.9 | |||||||||||
Delinquent loans and fees receivable, gross | 2.4 | 10.1 | 9.6 | 22.1 | |||||||||||
Current loans and fees receivable, gross | 4.3 | 60.6 | 54.6 | 119.5 | |||||||||||
Total loans and fees receivable, gross | $ | 6.7 | $ | 70.7 | $ | 64.2 | $ | 141.6 | |||||||
Balance of loans 90 or more days past due and still accruing interest and fees | $ | — | $ | 1.6 | $ | — | $ | 1.6 |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Fees on credit products | $ | 1,891 | $ | 6,407 | $ | 4,065 | $ | 11,794 | |||||||
Changes in fair value of loans and fees receivable recorded at fair value | 1,981 | 1,975 | 3,212 | 6,667 | |||||||||||
Changes in fair value of notes payable associated with structured financings recorded at fair value | (420 | ) | (1,151 | ) | (782 | ) | (2,308 | ) | |||||||
Rental revenue | 9,278 | 14,710 | 19,387 | 36,643 | |||||||||||
Other | 21 | 255 | 88 | 2,285 | |||||||||||
Total fees and related income on earning assets | $ | 12,751 | $ | 22,196 | $ | 25,970 | $ | 55,081 |
3. | Segment Reporting |
Three months ended June 30, 2015 | Credit and Other Investments | Auto Finance | Total | |||||||||
Interest income: | ||||||||||||
Consumer loans, including past due fees | $ | 9,898 | $ | 6,971 | $ | 16,869 | ||||||
Other | 10 | — | 10 | |||||||||
Total interest income | 9,908 | 6,971 | 16,879 | |||||||||
Interest expense | (4,228 | ) | (301 | ) | (4,529 | ) | ||||||
Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable | $ | 5,680 | $ | 6,670 | $ | 12,350 | ||||||
Fees and related income on earning assets | $ | 12,683 | $ | 68 | $ | 12,751 | ||||||
Servicing income | $ | 1,179 | $ | 211 | $ | 1,390 | ||||||
Depreciation of rental merchandise | (9,370 | ) | — | (9,370 | ) | |||||||
Equity in income of equity-method investees | $ | 707 | $ | — | $ | 707 | ||||||
Income before income taxes | $ | 1,186 | $ | 1,650 | $ | 2,836 | ||||||
Income tax expense | $ | (896 | ) | $ | (544 | ) | $ | (1,440 | ) | |||
Six months ended June 30, 2015 | Credit and Other Investments | Auto Finance | Total | |||||||||
Interest income: | ||||||||||||
Consumer loans, including past due fees | $ | 20,618 | $ | 13,694 | $ | 34,312 | ||||||
Other | 42 | — | 42 | |||||||||
Total interest income | 20,660 | 13,694 | 34,354 | |||||||||
Interest expense | (8,479 | ) | (607 | ) | (9,086 | ) | ||||||
Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable | $ | 12,181 | $ | 13,087 | $ | 25,268 | ||||||
Fees and related income on earning assets | $ | 25,756 | $ | 214 | $ | 25,970 | ||||||
Servicing income | $ | 2,538 | $ | 412 | $ | 2,950 | ||||||
Depreciation of rental merchandise | $ | (21,623 | ) | $ | — | $ | (21,623 | ) | ||||
Equity in income of equity-method investees | $ | 1,782 | $ | — | $ | 1,782 | ||||||
Income before income taxes | $ | 607 | $ | 3,577 | $ | 4,184 | ||||||
Income tax benefit (expense) | $ | 352 | $ | (1,174 | ) | $ | (822 | ) | ||||
Total assets | $ | 202,510 | $ | 69,422 | $ | 271,932 |
Three months ended June 30, 2014 | Credit and Other Investments | Auto Finance | Total | |||||||||
Interest income: | ||||||||||||
Consumer loans, including past due fees | $ | 11,492 | $ | 5,895 | $ | 17,387 | ||||||
Other | 37 | — | 37 | |||||||||
Total interest income | 11,529 | 5,895 | 17,424 | |||||||||
Interest expense | (5,812 | ) | (346 | ) | (6,158 | ) | ||||||
Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable | $ | 5,717 | $ | 5,549 | $ | 11,266 | ||||||
Fees and related income on earning assets | $ | 22,155 | $ | 41 | $ | 22,196 | ||||||
Servicing income | $ | 1,075 | $ | 159 | $ | 1,234 | ||||||
Depreciation of rental merchandise | (15,735 | ) | — | (15,735 | ) | |||||||
Equity in income of equity-method investees | $ | 841 | $ | — | $ | 841 | ||||||
(Loss) income before income taxes | $ | (11,661 | ) | $ | 1,156 | $ | (10,505 | ) | ||||
Income tax expense | $ | (316 | ) | $ | (357 | ) | $ | (673 | ) | |||
Six months ended June 30, 2014 | Credit and Other Investments | Auto Finance | Total | |||||||||
Interest income: | ||||||||||||
Consumer loans, including past due fees | $ | 25,888 | $ | 11,456 | $ | 37,344 | ||||||
Other | 274 | — | 274 | |||||||||
Total interest income | 26,162 | 11,456 | 37,618 | |||||||||
Interest expense | (11,644 | ) | (701 | ) | (12,345 | ) | ||||||
Net interest income before fees and related income on earning assets and provision for losses on loans and fees receivable | $ | 14,518 | $ | 10,755 | $ | 25,273 | ||||||
Fees and related income on earning assets | $ | 54,957 | $ | 124 | $ | 55,081 | ||||||
Servicing income | $ | 2,130 | $ | 344 | $ | 2,474 | ||||||
Depreciation of rental merchandise | $ | (40,746 | ) | $ | — | $ | (40,746 | ) | ||||
Equity in income of equity-method investees | $ | 3,247 | $ | — | $ | 3,247 | ||||||
(Loss) income before income taxes | $ | (21,724 | ) | $ | 2,178 | $ | (19,546 | ) | ||||
Income tax expense | $ | (1,971 | ) | $ | (684 | ) | $ | (2,655 | ) | |||
Total assets | $ | 237,163 | $ | 62,089 | $ | 299,252 |
4. | Shareholders' Equity |
5. | Investments in Equity-Method Investees |
As of | |||||||
June 30, 2015 | December 31, 2014 | ||||||
Loans and fees receivable pledged as collateral under structured financings, at fair value | $ | 18,425 | $ | 22,571 | |||
Total assets | $ | 19,410 | $ | 23,831 | |||
Total liabilities | $ | 61 | $ | 82 | |||
Members’ capital | $ | 19,349 | $ | 23,749 |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net interest income, fees and related income on earning assets | $ | 1,067 | $ | 1,193 | $ | 2,684 | $ | 5,309 | |||||||
Total other operating income | $ | — | $ | 44 | $ | — | $ | 93 | |||||||
Net income | $ | 874 | $ | 896 | $ | 2,281 | $ | 4,676 | |||||||
Net income attributable to our equity investment in investee | $ | 707 | $ | 841 | $ | 1,782 | $ | 3,247 |
As of | |||
December 31, 2014 | |||
Investments in non-marketable debt securities, at fair value | $ | — | |
Total assets | $ | — | |
Total liabilities | $ | — | |
Members’ capital | $ | — |
Three Months Ended June 30, 2014 | Six Months Ended June 30, 2014 | |||||||
Net interest (cost) income, fees and related income on earning assets | $ | (287 | ) | $ | 1,698 | |||
Net (loss) income | $ | (300 | ) | $ | 1,674 | |||
Net (loss) income attributable to our equity investment in investee | $ | (150 | ) | $ | 837 |
6. | Fair Values of Assets and Liabilities |
Assets – As of June 30, 2015 (1) | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Carrying Amount of Assets | ||||||||||||
Loans and fees receivable, net for which it is practicable to estimate fair value | $ | — | $ | — | $ | 122,581 | $ | 117,390 | ||||||||
Loans and fees receivable, net for which it is not practicable to estimate fair value (2) | $ | — | $ | — | $ | — | $ | 2,695 | ||||||||
Loans and fees receivable, at fair value | $ | — | $ | — | $ | 11,512 | $ | 11,512 | ||||||||
Loans and fees receivable pledged as collateral, at fair value | $ | — | $ | — | $ | 27,464 | $ | 27,464 |
Assets – As of December 31, 2014 (1) | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Carrying Amount of Assets | ||||||||||||
Loans and fees receivable, net for which it is practicable to estimate fair value | $ | — | $ | — | $ | 111,010 | $ | 101,753 | ||||||||
Loans and fees receivable, net for which it is not practicable to estimate fair value (2) | $ | — | $ | — | $ | — | $ | 4,144 | ||||||||
Loans and fees receivable, at fair value | $ | — | $ | — | $ | 18,255 | $ | 18,255 | ||||||||
Loans and fees receivable pledged as collateral, at fair value | $ | — | $ | — | $ | 34,905 | $ | 34,905 |
(1) | For cash, deposits and other short-term investments (including our investments in rental merchandise), the carrying amount is a reasonable estimate of fair value. |
(2) | We do not provide fair value for this portion of our loans and fees receivable, net because it is not practicable to do so. These loans and fees receivable consist of a variety of receivables that are largely start-up in nature and for which we have neither sufficient history nor a comparable peer group from which we can calculate fair value. |
Loans and Fees Receivable, at Fair Value | Loans and Fees Receivable Pledged as Collateral under Structured Financings, at Fair Value | Total | |||||||||
Balance at January 1, 2015 | $ | 18,255 | $ | 34,905 | $ | 53,160 | |||||
Total gains—realized/unrealized: | |||||||||||
Net revaluations of loans and fees receivable pledged as collateral under structured financings, at fair value | — | 2,462 | 2,462 | ||||||||
Net revaluations of loans and fees receivable, at fair value | 750 | — | 750 | ||||||||
Settlements, net | (7,449 | ) | (9,903 | ) | (17,352 | ) | |||||
Impact of foreign currency translation | (44 | ) | — | (44 | ) | ||||||
Balance at June 30, 2015 | $ | 11,512 | $ | 27,464 | $ | 38,976 | |||||
Balance at January 1, 2014 | $ | 12,080 | $ | 88,132 | $ | 100,212 | |||||
Total gains—realized/unrealized: | |||||||||||
Net revaluations of loans and fees receivable pledged as collateral under structured financings, at fair value | — | 4,867 | 4,867 | ||||||||
Net revaluations of loans and fees receivable, at fair value | 1,800 | — | 1,800 | ||||||||
Settlements, net | (4,391 | ) | (22,315 | ) | (26,706 | ) | |||||
Impact of foreign currency translation | — | 1,004 | 1,004 | ||||||||
Balance at June 30, 2014 | $ | 9,489 | $ | 71,688 | $ | 81,177 |
Quantitative Information about Level 3 Fair Value Measurements | |||||||||||
Fair Value Measurements | Fair Value at June 30, 2015 | Valuation Technique | Unobservable Input | Range (Weighted Average)(1) | |||||||
Loans and fees receivable, at fair value | $ | 11,512 | Discounted cash flows | Gross yield | 17.4% to 25.9% (21.0%) | ||||||
Principal payment rate | 1.0% to 3.8% (2.2%) | ||||||||||
Expected credit loss rate | 5.1% to 15.8% (9.7%) | ||||||||||
Servicing rate | 5.5% to 15.6% (9.8%) | ||||||||||
Discount rate | 15.9% to 16.2% (16.1%) | ||||||||||
Loans and fees receivable pledged as collateral under structured financings, at fair value | $ | 27,464 | Discounted cash flows | Gross yield | 29.2 | % | |||||
Principal payment rate | 2.7 | % | |||||||||
Expected credit loss rate | 12.7 | % | |||||||||
Servicing rate | 11.2 | % | |||||||||
Discount rate | 15.9 | % |
Quantitative Information about Level 3 Fair Value Measurements | |||||||||||
Fair Value Measurements | Fair Value at December 31, 2014 | Valuation Technique | Unobservable Input | Range (Weighted Average)(1) | |||||||
Loans and fees receivable, at fair value | $ | 18,255 | Discounted cash flows | Gross yield | 17.9% to 25.6% (21.0%) | ||||||
Principal payment rate | 1.5% to 3.6% (2.3%) | ||||||||||
Expected credit loss rate | 7.4% to 13.7% (9.9%) | ||||||||||
Servicing rate | 7.4% to 15.1% (10.5%) | ||||||||||
Discount rate | 15.9% to 16.2% (16.1%) | ||||||||||
Loans and fees receivable pledged as collateral under structured financings, at fair value | $ | 34,905 | Discounted cash flows | Gross yield | 27.2 | % | |||||
Principal payment rate | 2.7 | % | |||||||||
Expected credit loss rate | 13.5 | % | |||||||||
Servicing rate | 11.0 | % | |||||||||
Discount rate | 15.9 | % |
Liabilities – As of June 30, 2015 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Carrying Amount of Liabilities | ||||||||||||
Liabilities not carried at fair value | ||||||||||||||||
CAR revolving credit facility | $ | — | $ | — | $ | 31,700 | $ | 31,700 | ||||||||
ACC amortizing debt facility | $ | — | $ | — | $ | — | $ | — | ||||||||
Amortizing debt facilities | $ | — | $ | — | $ | 51,290 | $ | 51,290 | ||||||||
Revolving credit facility | $ | — | $ | — | $ | — | $ | — | ||||||||
U.K. credit card accounts revolving credit facility | $ | — | $ | — | $ | 1,524 | $ | 1,524 | ||||||||
Senior secured term loan | $ | — | $ | — | $ | 20,000 | $ | 20,000 | ||||||||
5.875% convertible senior notes | $ | — | $ | 38,828 | $ | — | $ | 64,537 | ||||||||
Liabilities carried at fair value | ||||||||||||||||
Economic sharing arrangement liability | $ | — | $ | — | $ | 82 | $ | 82 | ||||||||
Notes payable associated with structured financings, at fair value | $ | — | $ | — | $ | 28,685 | $ | 28,685 |
Liabilities - As of December 31, 2014 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Carrying Amount of Liabilities | ||||||||||||
Liabilities not carried at fair value | ||||||||||||||||
CAR revolving credit facility | $ | — | $ | — | $ | 28,500 | $ | 28,500 | ||||||||
ACC amortizing debt facility | $ | — | $ | — | $ | 125 | $ | 125 | ||||||||
Amortizing debt facilities | $ | — | $ | — | $ | 42,200 | $ | 42,200 | ||||||||
Revolving credit facility | $ | — | $ | — | $ | 4,000 | $ | 4,000 | ||||||||
U.K. credit card accounts revolving credit facility | $ | — | $ | — | $ | 3,924 | $ | 3,924 | ||||||||
Senior secured term loan | $ | — | $ | — | $ | 20,000 | $ | 20,000 | ||||||||
5.875% convertible senior notes | $ | — | $ | 37,662 | $ | — | $ | 64,302 | ||||||||
Liabilities carried at fair value | ||||||||||||||||
Economic sharing arrangement liability | $ | — | $ | — | $ | 119 | $ | 119 | ||||||||
Notes payable associated with structured financings, at fair value | $ | — | $ | — | $ | 36,511 | $ | 36,511 |
Notes Payable Associated with Structured Financings, at Fair Value | |||||||
2015 | 2014 | ||||||
Beginning balance, January 1 | $ | 36,511 | $ | 94,523 | |||
Total (gains) losses—realized/unrealized: | |||||||
Net revaluations of notes payable associated with structured financings, at fair value | 782 | 2,308 | |||||
Repayments on outstanding notes payable, net | (8,608 | ) | (22,425 | ) | |||
Impact of foreign currency translation | — | 1,103 | |||||
Ending balance, June 30 | $ | 28,685 | $ | 75,509 |
Quantitative Information about Level 3 Fair Value Measurements | |||||||||||
Fair Value Measurements | Fair Value at June 30, 2015 (in Thousands) | Valuation Technique | Unobservable Input |